Joe Tigay Don’t Kill the Golden Goose: A Market Maker’s View on Q3 Earnings and Market Leverage
By Joe Tigay
Former VIX and SPX Options Market Maker, Current Portfolio Manager of the Rational Equity Armor Fund
The stock market enters this week attempting to recover from last Friday’s brutal sell-off, but it stands on dangerously fragile ground. After months of relative calm, the VIX exploded more than 30% to close at 21.66—breaching the critical 20 threshold and signaling that investors are suddenly repricing risk across the board. Meanwhile, the S&P 500 dropped 2.7% and the Nasdaq plummeted 3.6% in Friday’s session, marking the worst single-day loss in months.
This morning, however, U.S. stock futures rally significantly as President Trump’s conciliatory weekend remarks about U.S.-China trade tensions (“it will all be fine!”) temporarily ease the extreme fear that gripped markets last week. Additionally, tech stocks lead the rebound, buoyed further by expectations that TSMC will report a record quarter this week, demonstrating the relentless, structural demand for AI chips.
Nevertheless, make no mistake: the market now faces a crucial test.
The Q3 Earnings Season Arrives at a Critical Moment
We enter the heart of Q3 earnings season with the market priced for near-perfection. Tomorrow, Tuesday, brings reports from major banking giants—JPMorgan Chase, Goldman Sachs, and Wells Fargo—which will serve as the first major stress test. As I discussed in last week’s analysis, strong bank earnings will provide critical stability, demonstrating resilience in trading revenues, capital markets activity, and overall financial health. Conversely, any weakness in their outlook for lending or deal-making could reignite the anxiety that exploded last Friday.
The stakes are high. Current valuations leave little room for disappointment, and as one analyst warned, market reactions to any earnings misses will likely prove “varied and violent.” Furthermore, the combination of elevated volatility, unresolved geopolitical risks, and the continuing government shutdown creates a fog of uncertainty. As a result, investors find themselves flying blind on key economic data—CPI and retail sales reports face delays—forcing them to rely almost entirely on corporate earnings to gauge the economy’s true health.
The Crypto Contagion: A Warning Sign We Cannot Ignore
The Weekend Collapse
Over the weekend, the cryptocurrency markets collapsed in spectacular fashion. Specifically, the same U.S.-China trade fears that hammered equities on Friday triggered a historic liquidation event in digital assets, wiping out over $19 billion in leveraged positions—the largest such event in history. Consequently, Bitcoin and altcoins crashed as overleveraged traders faced margin calls in a thinly-traded, weekend market that broke under the pressure.
What This Means for Traditional Markets
This morning, Bitcoin rebounds alongside stock futures, helping to stabilize sentiment. However, the underlying lesson cannot be ignored: we must remain vigilant about leverage anywhere in the financial system. Whether it hides in crypto markets, high-valuation tech stocks, or corporate balance sheets, leverage acts as a powerful amplifier during periods of stress. Indeed, what begins as a modest pullback can quickly spiral into a systemic event when forced selling feeds on itself.
The crypto flash crash demonstrates how quickly an overleveraged market can break, and it reinforces the deeply interconnected nature of global risk. Importantly, volatility in one corner of the market bleeds across other assets. Friday’s liquidation event serves as a stark reminder of what happens when investors try to get rich overnight through excessive leverage rather than building wealth steadily over time.
The Parable of the Golden Goose
This moment in the market reminds me of Aesop’s ancient fable about the goose that laid golden eggs. In the story, a farmer discovers he owns a miraculous goose that produces a single golden egg each day. Day after day, the goose delivers. Notably, this steady, reliable stream of wealth will make the farmer rich over time—extraordinarily rich. All he needs to do is collect one golden egg each day and let compound wealth work its magic.
The Fatal Mistake
But impatience and greed consume him. The farmer looks at his growing pile of golden eggs and thinks: “Why wait? Why not have all the gold right now?” He decides to kill the goose, convinced he can seize all the treasure at once. When he cuts the goose open, he finds nothing inside. Ultimately, in his rush to accelerate his gains, he has destroyed the very source of his prosperity. The golden eggs stop coming forever.
The Market’s Golden Goose
The market today offers us that same golden goose. The AI and technology boom generates extraordinary, structural growth—real “golden eggs” in the form of consistent earnings and sustainable stock price appreciation. Companies like Nvidia, TSMC, and the mega-cap tech giants produce genuine economic value that transforms industries and creates wealth. The underlying fundamentals are sound. Moreover, the revolution in artificial intelligence isn’t hype—it’s real.
The market has the proven ability to lay a golden egg every single day. This steady income stream, harvested patiently over time, will make investors rich. Compound returns, dividend growth, and consistent capital appreciation build life-changing wealth. History demonstrates this truth repeatedly: patient investors who allow quality companies to compound their returns over years and decades achieve extraordinary results.
Don’t Be the Greedy Farmer
The Temptation of Leverage
The critical mistake—the fatal error that destroys wealth—is acting like the impatient farmer. Some investors and speculators look at the market’s daily golden eggs and think: “This isn’t fast enough. I want all the riches upfront. Right now. Today.”
So they load up on leverage.
How Leverage Destroys Wealth
They borrow heavily to amplify their positions. They pile into speculative assets using margin. They bet the farm on options and derivatives. They chase maximum exposure rather than optimal exposure. In essence, they try to kill the golden goose, convinced they can extract all the value immediately instead of harvesting it steadily over time.
Friday’s crypto liquidation event shows us exactly what happens when this mindset dominates. Over $19 billion in leveraged positions evaporated in hours. Traders who could have participated in the crypto market’s long-term growth instead destroyed their capital entirely. They used massive leverage to try to get rich overnight, and when the market turned against them, the leverage that promised to amplify their gains instead amplified their destruction.
The goose died—not because the underlying asset failed, but because excessive leverage killed it.
The System-Wide Risk
This risk extends far beyond cryptocurrency. When investors load up on leverage anywhere in the financial system—in tech stocks trading at extreme multiples, in corporate balance sheets stretched thin, in portfolios built on borrowed money—they create the same fatal dynamic. A modest market pullback becomes a catastrophic wipeout. Forced selling cascades across assets. Ultimately, the golden goose stops laying eggs not because the fundamentals deteriorated, but because the financial scaffolding collapses under its own weight.
The Path Forward: Patience Builds Wealth, Leverage Destroys It
This Week’s Volatile Environment
The market now faces a choppy ride. The elevated VIX signals that sharp, two-sided price swings remain highly likely in the days and weeks ahead. Trade tensions show temporary de-escalation, but headline risk persists—a single tweet or policy shift could reignite the fear. Meanwhile, the government shutdown creates additional uncertainty, delaying the economic data that normally guides investor decisions.
The Banking Test
In this environment, this week’s bank earnings take on outsized importance. Strong results could lift the entire S&P 500, providing the confidence boost the market desperately needs and demonstrating that the golden goose remains healthy and productive. On the other hand, disappointing results could trigger another violent repricing of risk.
Two Clear Choices
The choice facing investors is clear:
Option 1: Be Patient. Allow the market to lay its golden egg every day. Collect steady, sustainable returns. Build positions in quality companies with strong fundamentals. Let compound growth work its magic over time. Accept that building real wealth takes years, not days. Importantly, this approach has created every great fortune in market history.
Option 2: Be Greedy. Load up on leverage trying to accelerate gains. Chase maximum exposure rather than optimal risk-adjusted returns. Try to extract all the value upfront. Kill the golden goose in a desperate attempt to get rich overnight. Watch as overleveraged positions explode during inevitable periods of volatility, destroying not just gains but principal capital.
The Bottom Line
Friday’s crypto liquidation demonstrates the consequences of Option 2. $19 billion in wealth vanished because traders chose leverage over patience. They wanted all the golden eggs at once and ended up with nothing.
The AI revolution and technology boom represent genuine, transformative economic growth. The golden eggs are real. The goose is healthy and productive. It will make patient investors extraordinarily wealthy over time through the simple discipline of collecting one golden egg each day and allowing wealth to compound.
The question is whether we have the wisdom to let it keep producing, or whether impatience and leverage will destroy the very foundation of this remarkable bull market.
This week’s earnings season will reveal which path the market chooses. I know which path I recommend.
To learn more about how the Rational Equity Armor Fund approaches income generation and capital preservation in volatile markets, visit our website. For more about my background, see my bio here.
